Meta, the parent company of Facebook, has come under fire from EU regulators for allegedly failing to adhere to the bloc’s antitrust regulations regarding its new ad-supported social networking service. The European Commission has criticized Meta for implementing a “pay or consent” model, where users must either pay for an ad-free experience or consent to have their data used for personalized advertising. This model, according to regulators, does not provide users with a viable alternative to the personalized ad-based service, as required under the Digital Markets Act.
In response to the allegations, a Meta spokesperson stated that the company’s ad-supported subscription model is in line with the guidance of the European Court of Justice and complies with the DMA. Meta introduced this new model following a ruling from the EU’s top court that companies should offer an alternative service that does not rely on extensive data collection for advertising purposes. The company maintains that it is working constructively with the European Commission to address the concerns raised during the investigation.
The European Commission has pointed out two key shortcomings in Meta’s ad-supported offering. Firstly, the model does not provide users with the option to choose a less personalized service that still offers equivalent functionality to the personalized ads-based service. Users should have the right to access a service that uses minimal personal data for advertising personalization. Secondly, the Commission noted that Meta’s model restricts users from freely consenting to the use of their personal data for targeted online ads, a violation of the DMA.
The Digital Markets Act, which came into force in March of this year, is designed to prevent anti-competitive practices by large digital companies and compel them to open up their services to competitors. Companies found to be in breach of the DMA could face substantial fines, up to 10% of their global annual revenue or even 20% for repeated violations. If Meta is found to have violated the DMA, it could potentially be subject to a penalty as high as $13.4 billion, based on its projected earnings for 2023.
Following the EU’s preliminary findings, Meta will have the opportunity to present its defense in writing. The Commission’s investigation, launched in conjunction with probes into tech giants Apple and Alphabet, is expected to conclude within 12 months from the commencement of the proceedings. Meta’s handling of this investigation will be critical in determining the outcome of the case and the potential repercussions for the company in light of the allegations of antitrust violations.
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